Since 2009 blockchain has been one of the hottest topics. In the last few years, excitement in blockchain technology has increased dramatically, as it is expected to be a changing force in private and public sector operations.
Besides facilitating cryptocurrency transactions, blockchain technology can be applied for making cross-border payments and building digital asset marketplaces to manage supply chain, decentralised blockchain projects like NFT, metaverse games etc.
According to Grand View Research, the blockchain technology market in world size was valued at $3.67 billion in 2020 and is hoped to grow suddenly at least in a compound annual growth rate (CAGR) of 82.4 percent from 2021 to 2028.
If you are excited in learning the fundamentals of blockchain, blockchain meaning, knowing what are blocks, nodes and distributed ledger technology, Crypto currency, Cryptocurrency meaning then this article has everything you need to know:
Fundamentals of Blockchain Technology
In its easiest form, a blockchain consists of a chain of blocks. When data is introduced over time in blocks, new blocks are built on top of previous ones. Each block consists of a cryptographic hash ( an information joining the new block to the previous one), a timestamp or duration stamp and transaction data. And after that the hashes holding the blocks together, a chain of blocks is made, forming a blockchain.
The transactions it consists of are recorded on different computers or devices across the world (also called as nodes). These features make it impossible to subsequently change a block without altering all next blocks. Another aspect of blockchains is that they are managed by a peer to peer or P2P network of users. In the P2P network, there is no central server or manager. When a person wants to exchange information with a peer, they can send it immediately to the recipient, without having to navigate through a centralised system or database.
Decentralisation
When many nodes contain copies of the public ledger containing transaction data, the blockchain is called as distributed. Blockchains are naturally distributed, but this doesn’t always suggest they are decentralised. In a decentralised network, any person can take part and transact on the blockchain. And mechanisms must exist to guarantee accuracy of transactions and address any vulnerabilities that may come from this design.
In the case of Bitcoin, the first cryptocurrency made on blockchain technology mechanisms such as mining (creating new Bitcoin by solving a calculation puzzle) and proof of work (proving a specific computational effort has been expended) exist to save the integrity of the ledger and prevent hack of the system. It also has a dedicated blockchain explorer where all the transactions from genesis to now is open and can be checked by anyone. Bitcoin is hence considered revolutionary for making blockchain technology and laying the base for the growth of the industry.
Use of Bitcoin crypto currency
In the whitepaper of bitcoin in 2008, pseudonymous founder Satoshi Nakamoto said it as a normal peer to peer version of electronic cash that would make online payments to be sent directly from one person to another without going through a bank or other institution.
Explaining the first blockchain, Nakamoto wrote:
“The network timestamps the payment by hashing them into a chain of hash-based proof-of-work, making a record that cannot be changed without redoing the POW. The longest chain not only works as proof of the sequence of events happened, but proof that it came from the largest party of CPU power.”
If a majority of computational power i.e., 51 percent and more is governed by nodes that do not have a malicious intent to cooperate to attack or corrupt the network, the blockchain grows longer and blocks attackers. The whitepaper also said that nodes can leave and join again, and the network have to accept the longest chain as proof of transactions that happened while they were absent.
Example of a transaction on blockchain
To know more about how transactions take place on the blockchain, read this simple example about how the Bitcoin blockchain is programmed to work:
Suppose if Emma wants to send Rs 5,000 to David, she notifies her bank (a centralised body) by initiating the transaction. After verifying that Emma has at least 5,000 to perform the transaction, the bank updates its database. Emma’s account balance in the database is reduced by Rs 5,000 and David’s balance is increased by the same amount. Here, it is assumed Daviduses the same bank as Emma.
If Emma wants to perform a similar transaction, but instead of money she is sending bitcoin then the process is different. Here, a centralised body like a bank does not perform tasks anddoes not update balances.
There is no singular person responsible for this. Instead, all the nodes of that blockchain will have to be involved in the transaction, due to its decentralised nature. For her to send one Bitcoin to David, Emma must first know David’s public key (explained further) and then share a message in the network so that other nodes can view it. The nodes, or the validators, then go out to solve a puzzle set out by the protocol, which needs them to hash transactions and other information in the block. This is called as mining, and those performing this work are called miners. The miners should keep hashing data (little modified each time) until a valid solution is found to the puzzle and the Bitcoin can be sent to David.
Finding a valid answer for the successful transfer of Bitcoin makes a new block, and creates a block reward for the miner who solved it. Once the transaction is added to the Bitcoin blockchain, all other nodes can view and validate it, and update their copies of the ledger to show it.
At the same time, Emma’s crypto wallet (a digital place where she stores her Bitcoin) is updated to show it has sent some amount of Bitcoins, while David’s crypto wallet is updated to show it has received the exact Bitcoins.
After that the network knows about the transaction, Emma is stopped from sending the same Bitcoin to someone else (called as double spending).
Public keys and private keys
To get Bitcoin or any other type of cryptocurrency on the blockchain, David needs a public key and also a private key.
Public key cryptography shows ownership of funds, and in this case, Emma needs to know David’s public address (generated from the public key) so that she can send him the Bitcoin.David’s private key should be kept a secret and unknown to anyone except him. The private key is similar to a password which permits its owner to access and spend cryptocurrency.
The public key is derived from the private key, and it is almost impossible for anyone to reverse find the process to obtain the private key. If David has not disclosed his private key, he alone can get and spend the Bitcoin sent to him by Emma.
Other blockchains
After Bitcoin’s structure was implemented in 2009, several other blockchains have been made with a different range of use cases for each.
For example, Ethereum which is one of the most famous blockchains is a distributed, decentralised blockchain that helps people to run programming code of decentralised apps.
Ripple, which is another currency but centralized by blockchain technology, is another popular example.
Blockchain courses
If you are interested in jumping into this huge revolution, there are a lot of blockchain courses available from beginner level to advanced. Some of the good courses are available in Coursera, Codecademy, LinkedIn Learning, “Solidity, Ethereum, and Blockchain: The Complete Developer’s Guide by ZTM Academy”, “Learning Blockchain Development with EOS and C++ (Udemy)”. There are some good paid blockchain courses like Berkeley’s Blockchain Fundamentals Professional Certificate available too which gives complete blockchain tutorial on learning.
Crypto world trading
Cryptocurrency is a product of blockchain. Since its inception, Cryptocurrency market has taken leaps and bounds. A lot of cryptocurrencies went to become billion-dollar market cap and lot more got wiped out too. The crypto news also gives technical and nontechnical information about the crypto market. Getting updated on cryptocurrency news helps the crypto traders to analyse the crypto currency market and take actions accordingly.